Hyper growth China stocks

This Board doesn’t appear to like Chinese stocks but I own the below stocks, and they seem to have turned the corner:

Alibaba (BABA) : ecommerce/payments
Baozun (BZUN) : ecommerce solutions
Huya (HUYA) : esports + v.games
IQiyi (IQ) : video streaming
Tencent Music (TME) : music stream
Nio (NIO) : EV maker
Weibo (WB) : social media (Twitter)
Tencent (TCEHY) : games, payments

Ping An Healthcare (1833 in HK)
ZhongAn Insurance (6060 in HK)

Many of the above companies are growing revenues by triple digits and the rest are ‘only’ growing by 30-60% yoy!

Yes, many of the small cap reverse merger stocks from 2011-12 were scams, (I know because I was burnt by a few) but the above are legit and dominant businesses with many institutional and PE investors and proper analyst coverage.

The above stocks were battered last year due to the trade conflict but they have now bottomed out. After forming lengthy bases, they have now broken out to the upside and are soaring!

Best of all, most are trading around 1 PEG and I am fairly certain they will provide stellar returns over the next 5 years.

45% of my portfolio is now invested in the above China stocks.

China’s economy is projected to triple over the next 30 years and the above companies will probably be at the forefront of this economic development.

I truly believe that these great businesses are currently on the bargain table!

My two cents…





China Taiping Insurance
Yangtze fibre optics
Universal Medical

(All HK).

Just saying. (Ali Baba is a top 5 holding for me - also own Tencent and Ping An).


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Be careful. Have you looked at these company’s sec filings? This guy did:

It’s not pretty. To me it reeks of Enron’s corporate can of worms structure.
Their accounting is not audited by any sort of an official body or any trustworthy company.

Also, unlike with Enron no investigatve journalist can take a closer look at them. This means they can potentially keep the facade up for much longer but also, if one of these companies goes bust, all the other ones are going to plummet. People will be forced to ask the hard questions, like “is my investment also at risk of imploding due to fradulent book keeping” and will fins that the answer is “there’s no way to know”.



Jim Chanos was also putting out such stuff about Alibaba for years.

When Alibaba’s management invited him to visit their operations in China, he refused!

Then, when the stock doubled, he covered his shorts at a huge loss and bailed.

Then, he gave a lame excuse for being wrong (he claimed that the new SEC head is Jack Ma’s associate/friend etc.)!

Alibaba is not a penny stock, it is one of the biggest companies on the planet and its investing in really promising disruptive businesses all over the world!

Alibaba controls over 65% of e commerce in China, over 50% of mobile payments, runs one of the biggest money market funds in China and it is one of the biggest cloud companies in the world (4th spot behind Amazon, Microsoft and Alphabet).

It also owns numerous supermarkets, a rapidly growing advertising business, a major SouthEast Asian online marketplace. Finally, it has stakes in several fintech/e commerce businesses overseas.

So, given these facts and the fact that the SEC has already inspected its books, I’ll stay the course.

Thank you for your concern though and bringing this to my attention.



I think you are correct, but you’ll probably get limited follow up on China stocks here partly because Saul is not a fan of them.

His methods are providing stellar returns with a strategy crafted over time. so it introduces an unnecessary element of risk from a perspective.

I think the Trade war FUD has shown the strength of US listed Saas businesses and shown the vulnerability of China ADRs. They are less transparent from an international perspective, for many reasons. VIE structures have their own risks. Also political (tencent and games) and currency risks.

But I believe ignoring China is missing an amazing growth story for the more risk tolerant investor with a long term horizon


GM, I wouldn’t recommend anyone putting all their eggs in the China basket, but I’m good with taking some risk. I agree, China has huge potential. I’m long:


TenCent is much much more than a messaging and online gaming company. They’re becoming a venture capital play with some 600+ investments, including a big stake in TME (TenCent Music, which in turn owns a chunk of Spotify) as well as: Tesla (5% ownership),GoJek,Reddit,Snap (10%),Uber and Nio



Nio (the Tesla of China) got a huge boost from the 60 Minutes story on 2/24/2019. I think the Nio dashboard assistant “Nomi” not only has huge appeal (it’s cute and very engaging) but offers a better solution than Tesla’s dashboard mounted touch screen. Want to turn up the air? Just ask Nomi. And Nio offers a touch screen as well. The range is good too - like over 500 km - and some models feature a battery pack than can be replaced with a new, fully charged one in 3 minutes at special stations. A fleet of NioPower vans can rescue a motorist with dead batteries.


Nio just began selling cars in mid 2018 and the valuation is relatively low at $9 billion, compared to Tesla at $50 billion. And they are burning through money. However the Chinese government is offering huge rebates to buy EVs (like $10,000) and waiving the license fees - essentially like waiving the sales tax - to buy one. There’s a huge push from Bejing to go electric and every automaker must make at least 10% of their fleet sales EVs. Nio already has a US-based executive and some 600 techs working here and will reportedly sell their luxury EVs in the US. No date set.

Bidu is facing a lot of headwinds and the stock reflects that. They appear to be losing in search and more and more Chinese are spending their time exclusively inside TenCent’s WeChat ecosystem. But if Baidu’s self-driving bus and taxi initiative takes off, it could be a winner, so I remain long. Valuation of $59 billion is modest, especially given their 58% stake in Iqiyi is worth $9 billion and the value of the 19% Ctrip.com stake is $3.4 billion.





I never suggested that anybody invest all their money in China or in any other sector(s)/nation(s) for that matter.

Even though I live in Hong Kong and know China fairly well, I’ve only invested 45% of my a/c equity in China and that too, via almost 8-10 companies operating in different areas.

The risks of concentration are known to me - big volatility in the equity curve.

My own portfolio is comprised of 22 companies (which operate in around 15 areas and in many countries).

Agreed - Alibaba and Tencent are very diversified and akin to mutual funds but it was very late when I posted last night so didn’t do a deep dive about all the companies I mentioned.

Some of the names had a big pop yesterday and it appears as though these businesses will get re-rated over the following weeks and months.

I wish you well with your investments.



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Wish I had more money.
Got nothing to buy China with, but I agree.

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Thank you for your post - this board is about growth stock investing and the names I mentioned in my original post have some of the highest growth rates I’ve ever seen!

HUYA, NIO, Ping An Healthcare & Technology and ZhongAn Insurance are growing top-line by tripe digits and they have HUGE growth runways! The others are also growing rapidly and all of them are very dominant in their respective fields.

The best thing though is that due to the trade war scare, their valuations have become silly cheap - PEG ratios of 0.8-1.2 or Price/Sales ratios of 3-5 (for triple digit growth)!

History has shown over and over again, that the highest growth stocks with the lowest valuations provide the best returns and that is why I posted last night. FYI - my non-US stocks have provided the best returns YTD for this very reason - undervaluation.

For my part, I’ve voted with my cash and invested 45% of my money in China stocks (have gradually increased my exposure late last year).




Apologies, GM, I knew you weren’t suggesting going all in. My comment was in response to others who were concerned about risk.

Thanks for the insight on HUYA, Ping An Healthcare & Technology and ZhongAn Insurance.

I am also long CEO, (up 44%) and it pays a 4.26% dividend at the current price.

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As I mentioned I agree with your underlying your thesis. I have had in Tencent which I switched to NTNX in the last year.

I have held a large position in Bzun for about 2 years and believe in the LT potential of the company. The position was great for the first year and has been less great for obvious reasons for the last 12 months. I anticipate it will outperform over the next 12 months.

I was originally very excited to come across GSUM (cloud based big data analytics) in Oct 2017 as a fusion of China growth and the familiar Saas pattern. I thought it was a diamond in the rough. But they had issues with revenue recognition and operational metrics fell off badly, and the IR comms were poor. I closed my position and put the money in AYX during the October dump and am not looking back till they GSUM reaccelerate and prove they have good product / market fit. I monitor it from afar but the story is better than the reality for now

I have previously done well from short term positions in SECO (luxury retail with 2nd / 3rd tier city focus) but it extremely volatile with a low float so I never stay for long. Good growth rates but low margins

I have been in and out of IQ. Competition with Tencent video and Youkou Todou (?sp) but seem to be doing well with original programming.

Lots of interesting consumer Internet companies like YY,WB, MOMO,BILI. HUYA. I don’t fully ‘get’ the gift based interaction economy. I understand it intellectually but seems a bit weird to me I guess.

I think the fintech plays of JT and PPDF will be interesting once the sector is cleared of P2P junk.

So I agree with the sentiment of your argument. However, other than BZUN I have struggled to find a trustworthy low marketcap, high gross margin, software based company with recurring revenue that I can buy into with confidence for the long term. I’ll review some of the companies you listed to see what I’ve missed though.

I appreciate your post.

Thanks for the post Tchalla; I’ll also take a look at some of the companies you’ve highlighted.




SEC has not been able to inspect Chinese companies so far. And I’m talking about the actual companies in China, not the shell in the Caymans that is actually being listed.

If you have any reputable source saying otherwise, please post it, I would be interested in seeing that.

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The SEC started inspecting Alibaba’s books in spring 2016 and over the following months, there were several newspaper reports which stated that the company was assisting and had provided all the documents requested by the SEC.

So, this investigation started almost 3 years ago and up until now, no action has been taken by the SEC and Alibaba hasn’t been charged with any wrongdoing.

Don’t you think if Alibaba was cooking its books, the SEC would have realised by now?

I’ll try and find recent articles/reports.


Look, I don’t want to dwell on it as it’s only tangential to this board. The SEC issued a statement just over two months ago where they warn investors about their inability to inspect chinese accounting:


Although substantial progress has been made, issues relating to information access remain, and our experience leads us to expect that new access issues are likely to arise. One of the most significant current issues relates to the ability of the PCAOB to inspect the audit work and practices of PCAOB-registered auditing firms in China (including Hong Kong-based audit firms, to the extent their audit clients have operations in mainland China) with respect to their audit work of U.S.-listed companies with operations in China.

I don’t think anything has changed since then. All I wanted to do is to warn you in good conscience.

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Thanks for your concern Stenlis; I appreciate it.

Look, I don’t want to dwell on it as it’s only tangential to this board. The SEC issued a statement just over two months ago where they warn investors about their inability to inspect chinese accounting:

I can’t hold back. I just don’t understand why, if we have been able to approximately quadruple our money in a little over two years buying conventional US companies, why would anyone take the extraordinary additional risks of investing in Chinese companies. I’m talking about political risk within China, international risk of economic or even military strife between China and US, the risk of lack of transparency, the risk of actual fraud which is oh so real, the risk of attitude about outside investors versus insiders which is much different in China.

Here’s what I wrote in the Knowledgebase some years ago. It still holds:

‘Wanting to be an informed investor means that I generally avoid foreign companies. And I won’t touch ANY Chinese company. Not even Baidu. This is due my experience in 2010 or so with 13 little (but US Listed) companies, some [most] recommended by MF Global Gains (since closed down), of which fully 11 turned out to be fraudulent in one way or another. You simply can’t tell what’s going on in a Chinese company. Consider that Yahoo is a major company, and owned 40% of Alibaba, and the Chinese CEO blithely gave himself the fastest growing subsidiary as a present without telling Yahoo. If it can happen to a big company like Yahoo, what chance do I have? I probably wouldn’t invest in companies in other emerging markets either.’

Sure China is growing rapidly. Sure their markets have sold off. Sure if you are a speculator and want to roll dice you may be able to make money in some of the stocks. Sure some US companies have been fraudulent too. But if some have gotten away with it in the US even with SEC inspection, can you imagine the level of fraud without it?

Look, it’s a culture built on close relationships between insiders, both in the ruling party and the corporate structure, and of course families, where a CEO can say to the CEO of an auditing firm “If you just overlook this little issue, we can buy $25 million of imaginary product from your brother’s firm”, and that wouldn’t be considered out of line behavior by the auditing CEO, because it’s “taking care of family”. And I’m not criticizing it. It’s just the way it is. It’s a different culture with a different value set. And I’m sure that my view is colored by my experience with how even the Motley Fool got fooled by all those fraudulent companies, even after the heads of MF Global Gains traveled to China and met with the principals and inspected the premises, etc.

So, why in the world would anyone voluntarily take on all that extra risk! I just don’t see it. You can’t buy all the companies in the world. When you can buy very rapidly growing companies without that risk, why pick ones with extra risk, even for a quarter or a third of your portfolio. It just doesn’t make sense to me.



Hi Saul

Thanks for your thoughts. Always appreciate your input

If one believes in the China growth story and GDP projections by 2030, the question is - is there reason to believe the next decade may yield improvements in the issues raised and subsequently, valuation by a proxy?

It’s a bit like the different between being a VC and investing in public markets, and the risks entailed in both.

Both looking for great returns. You are more likely to get a 100x return as a VC, thought it remains statistically unlikely overall and is far riskier.

A decade out, I am willing to take the risk with a small chunk of my portfolio.


Here’s a public post that I found on Google just now, so I feel okay about posting it here, especially as it is already three years old. I won’t put it in italics to make it easier to read:

'Buying Stock in China’s Publicly Traded Companies: Good Luck With That

By Dan Harris on March 12, 2016


I am a China lawyer.

That means I am not a China expert, not a China investment advisor and not a China stock analyst. So when I tell you that I have never invested in a publicly traded Chinese company and I cannot see myself ever investing in a publicly traded Chinese company, you should (and you probably will) completely ignore me and not change your behavior in any respect.

But I am going to ramble about China stocks in this post anyway.

What has spurred this post (and my rambling) is having just read a post on the always superb China Accounting Blog, by Paul Gillis, PhD/CPA Professor at Peking University’s Guanghua School of Management and the person who knows more about China accounting practices than pretty much anybody. Paul’s post cites to and agrees with another blog post, one written by Dan David at GEOInvesting, entitled, EB-5: The SEC Has Done an Amazing Job Protecting Chinese Investors – Will China Return the Favor? The GEOInvesting post bemoans how the United States Security Exchange Commission (SEC) does a great job protecting Chinese investors from getting ripped off in (US) investor scams but pretty much nothing to protect US investors in Chinese stocks:

As David points out in his post, the only CEO to be jailed for defrauding US investors was Dickson Lee of L&L Energy. Lee, however, was a US citizen and was arrested on US soil, so Chinese authorities could not protect him. [Saul here: Interestingly that was one of the Chinese companies that I got ripped off by].

Perhaps the most egregious case was Ming Zhao of Puda Coal, who faces a $250 million judgment from the SEC for ripping off U.S. shareholders. But Chinese authorities have not helped the SEC to enforce the judgment, and instead elevated Ming Zhao to the Eleventh Standing Committee of the Chinese People’s Consultative Congress. I guess he is viewed as a model comrade… [Saul here: This one sounds familiar but I don’t remember for sure].

…Gillis sees Chinese regulators as “playing US regulators for fools. They are protecting Chinese fraudsters and thereby creating a safe harbor for those who wish to commit fraud against US investors. At the same time, they welcome application of the rule of law in the US to protect Chinese investors. US regulators are letting them have their cake and eat it too.”

Gillis then discusses how the “SEC has been unable to bring Chinese fraudsters to justice; as long as they stay in China they remain outside of the grasp of US regulators. China has shown no interest in prosecuting Chinese fraudsters for crimes committed in China that are clearly crimes in China, apparently on the basis that victims of the crimes were not Chinese. And US regulators have had little success in getting cooperation from Chinese regulators at bringing the fraudsters to justice in the United States.”

But Gillis believes that if the US actually started getting tough with China stock fraudsters, we would start seeing results:

What China is doing is a version of the poker strategy of shooting the angles. In poker, angle shooting is the act of using various underhanded, unfair methods to take advantage of inexperienced opponents. The difference between angle shooting and cheating is simply a matter of degree….

…The SEC got a partial victory against the Big Four accounting firms in China when it threatened to ban them because China would not allow the production of documents. I believe that if the SEC/PCAOB can make a credible threat that they will kick Chinese companies off US exchanges they can get China to prosecute fraudsters who rip off US shareholders, to help recover funds, and to properly regulate auditors and listed companies.

Dan David asks one key question: Why is it illegal in the U.S. for fraudsters to steal from Chinese investors, but in China fraudsters are not prosecuted for, stealing from U.S. investors?

Guess what? They are both right. It is very easy for Chinese companies to engage in stock fraud without repercussions. Our China attorneys see this all the time, as hardly a month goes by without someone contacting us to see if we might be interested in pursuing a stock fraud claim against XYZ Chinese company. The problem is that unless XYZ is still operating in the United States (or in Canada, which faces many of the same issues) or purchased American insurance that might cover the fraud claims (which is not likely), these just do not tend to make for great cases, because there is no money pot at the end of the proceedings.

So if you are buying (most) Chinese stocks, you are on your own. In other words, caveat friggin emptor baby. And that (plus the fact that we rarely see a Chinese company with fewer than three sets of books) is why I will not buy Chinese company stocks.’


There is another factor. Some time ago, I simply identified both China and Russia as quite obviously hostile to the west (on account of various actions) and decided not to invest in either country.